But Socioeconomic Planning Secretary Augusto B. Santos said the government has requested that it be given the authority to develop the real-estate component of the project because ULC is not amenable to posting a performance bond, which is equivalent to $1.899 billion in tax benefits from the project and real-estate development, to be paid annually over 25 years.

The ULC’s counter proposal was a performance bond of $340 million, or 10 percent of both the construction and real-estate development components of the project, to be paid on a three-year basis, instead of annually. ULC’s proposed bond consists of $220 million to cover real-estate development cost and the remaining amount for construction cost.

Eli Levin, ULC managing director and chief executive, earlier expressed concern that the proposed linkage between amortization payments due after completion of MRT system and performance undertaking on real-estate development may unduly curtail, if not jeopardize, the firm’s ability to raise the loans and realize the pledges of equity for the rail project.

ULC investors in the MRT 7 project include SM group’s Sy family, Siemens Group, Yuchengco Group, George Go group, China Railway and a Japanese firm.

The counter proposal of ULC was to have two performance undertakings, one for the debt and minimal equity return corresponding to the portion for international and institutional investors equity and another for the balance pertaining to the return on equity of strategic investors.

“The latter financial performance undertaking may impose limited conditions referring to the implementation of the undertaking of real-estate companies. Wording of an acceptable comfort level from real-estate companies may be negotiated,” Levin said in the same letter.

The $1.235-billion MRT 7 project will run from San Jose del Monte station in Bulacan to North Avenue, SM City station, which will link the line to LRT Line 1 and MRT 3.

[The Manila Times]